Abstract
Republic of Poland: Arrangement Under the Flexible Credit Line and Cancellation of the Current Arrangement-Staff Report; Press Release; and Statement by the Executive Director for the Republic of Poland
Highlights
Prepare financial markets for a gradual exit from the Flexible Credit Line (FCL), the authorities have publicly recognized the benefits of the FCL while at the same time stressing that Poland is better prepared to deal with adverse external shocks than at the height of the crisis, including because of higher international reserve buffers
Sources: BIS Locational Banking Statistics, Haver Analytics, IFS, National Bank of Poland (NBP), KNF, and International Monetary Fund (IMF) staff calculations. 1/ This chart is based on BIS methodology and data, while the middle-left chart is based on NBP methodology and data
Given the strengthened fundamentals and buffers and considering the balance of risks, we request the approval of a successor 24-month FCL arrangement for Poland in a reduced amount equivalent to SDR 15.50 billion (918 percent of quota) and wish to cancel the current arrangement approved on January 18, 2013 effective upon approval of the new FCL arrangement
Summary
Poland’s strong fundamentals and sound policies helped it to successfully withstand several bouts of market turbulence and paved the way for economic recovery. While Poland has benefited from its continued transformation into a more open and dynamic economy, its substantial trade and financial linkages with global markets, combined with still-large financing needs, make it vulnerable to external shocks. In this context, the authorities consider that a new FCL in the requested amount would provide an important insurance against external risks, help sustain market confidence, and support their economic strategy. At the conclusion of the 2014 Article IV Consultation, Executive Directors noted that Poland’s very strong fundamentals and economic policies had helped it weather the turmoil in financial markets and that the precautionary FCL arrangement provided important insurance against external risks. While this helped support domestic demand, inflationary pressures remain weak, primarily reflecting low energy and food prices and subdued imported inflation
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